Most Asia markets up after Wall St record

HONG KONG, July 17: Most Asian markets rose Monday following another record close on Wall Street, while Shanghai stocks pared steep early losses thanks to stronger than expected growth figures, reports AFP.
The world’s number two economy expanded an annualised 6.9 percent in April-June, beating forecasts in an AFP survey and indicating it is stabilising after a years-long slowdown.
However, while the reading was the same as the previous three months, officials warned of “uncertain factors abroad and long-term structural contradictions” at home.
China is trying to shift from an economy reliant on state investment to one powered by consumer spending. Its leaders are also attempting to clamp down on bad debt, which analysts fear could spark a financial crisis if not dealt with. Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings in Singapore, told Bloomberg News that while fiscal stimulus remains an important driver of growth “it’s also encouraging to see more signs of rebalancing, with the pickup in retail sales growth.”
Shanghai stocks plunged more than two percent before the release of the GDP figures, on worries about the government’s drive to deal with the debt crisis. But they partially recovered afterwards and ended down 1.4 percent. Most other regional investors built on last week’s solid gains, tracking fresh highs for the Dow and S&P 500 prompted by below-par US inflation and retail sales data.
The US readings missed forecasts and fuelled speculation that the Federal Reserve’s plans to raise interest rates this year could be put on the back burner. This sent equities higher since borrowing costs look likely to remain low.
Hong Kong stocks kicked the week off with further gains, extending a five-day rally Monday following another record close on Wall Street. The Hang Seng Index jumped 0.76 percent, or 200.29 points to 26,589.52 at the open.
But the benchmark Shanghai Composite Index inched down 0.08 percent, or 2.63 points, to 3,219.79 while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, dropped 0.47 percent, or 8.78 points, to 1,872.23.
Singapore was 0.1 percent higher while Wellington, Taipei and Manila all saw healthy rises. But Sydney ended 0.2 percent down. Tokyo was closed for a public holiday.
Lower expectations for a rise in US interest rates rattled the dollar on Friday. While the unit was stronger it struggled to claw back its big losses against the pound, euro and yen.
The greenback was already under pressure after Fed boss Janet Yellen gave a more doveish outlook for future rises in interest rates, pointing to the bank’s struggle to fire up inflation.
“Persistently low inflation and soft retail sales in the US are raising legitimate concerns about whether the likely resting point for the Fed Fund Rate might be well below the three percent” that is forecast for the end of 2019, said Ric Spooner, chief market analyst at CMC Markets. In early European trade London and Frankfurt each rose 0.2 percent, while Paris was flat.
U.S. stocks looked set to open little changed on Monday as investors treaded water ahead of a busy earnings week from big U.S. companies.
Bank of America, Morgan Stanley, Goldman Sachs, Microsoft, IBM and Johnson and Johnson are scheduled to report results this week.
Netflix, which will report results after the market close on Monday, rose 1 percent in premarket trading. Analysts estimate second-quarter earnings for the S&P 500 companies rose 8.1 percent from a year earlier. First-quarter earnings posted their best performance since 2011, according to Thomson Reuters data.
Earnings will be closely watched to see if high valuations are justified in the face of tepid inflation and a recent patch of mixed economic data.
The S&P 500 has been trading at about 18 times earnings estimates for the next 12 months, compared with the long-term average of 15 times.“The U.S. market isn’t cheap right now,” said Phil Guarco, global investment specialist at J.P. Morgan Private Bank.
“Earnings are going to take an important role. We’re in a situation where the corporate profits and the profits they are going to deliver in the future will be of keen interest.”
Dow e-minis 1YMc1 were up 14 points, or 0.06 percent, with 14,981 contracts changing hands at 8:30 a.m. ET (1230 GMT).
S&P 500 e-minis ESc1 were up 1.25 points, or 0.05 percent, with 107,776 contracts traded. Nasdaq 100 e-minis NQc1 were up 7.25 points, or 0.12 percent, on volume of 20,886 contracts. The Dow and the S&P hit record highs on Friday after weak economic data dulled prospects of more interest rate hikes this year. Last week, investor sentiment got a boost after Federal Reserve Chair Janet Yellen said future rate hikes could be gradual in the face of persistently low inflation. The Fed will meet next on July 25-26.
“Apart from earnings, the biggest driver has been the rate hike trajectory. The central banks need to be more transparent and continue to project that the unwinding of quantitative easing will be done in an extremely gentle way,” said Guarco.
World shares continued to hover near record highs after data showed China’s economy grew at a faster-than-forecast 6.9 percent year-on-year in the second quarter.
Shares of BlackRock fell 2.6 percent after the world’s biggest asset manager’s quarterly profit came in below expectations.
Procter & Gamble edged up 0.7 percent after activist investor Nelson Peltz’s Trian Fund Management said it is seeking a board seat at the company.